Quote from: classicsucks on May 15, 2017, 10:24:49 PM

I'm not familiar enough with the terminology and schools of thought to debate you on this. All I know is that you're backing your arguments with roughly conventional 21st century capitalist economic theory. I don't necessarily refute this theory, but I regard it with a healthy dose of skepticism, and I believe it's not necessarily applicable when analyzing bitcoin. So debates over bitcoin money supply, deflation/inflation, etc. are not necessarily covered by this theory.

Well, call me conservative, but I'm not buying the idea that whole international pans of economists are in a kind of conspiracy or group think erroneously putting aside a former correct theory of money to replace it with gobbledegook. Economy is a complex science, because it combines different fields and sociological aspects, but I don't think that world-wide scolars are deluded to the point of defending totally erroneous views on things. Our state of knowledge advances of course, and what was once thought to be more or less right, turns out to be more subtle than imagined, but I won't just say that most of late 20th century monetary theory is bogus, and that some ideas from the beginning of the century are "obviously" closer to the truth. In fact, the "classical" story of how money came to be (namely, a generally used commodity that was more and more used as an intermediate good of exchange) is historically proven *entirely wrong*. Nowhere, ever, a generally used commodity became money. This is nevertheless on what older theories, such as sound money doctrine, are based on.

And the "this time it is different" story, I don't buy either. Bitcoin is a monetary asset, just like any other monetary asset, that is, not of direct utility, but only of value to be exchanged for something of value. It doesn't fall outside of the scope of any theory regarding monetary assets, not more than most other things of which the direct utility is small or non existent compared to its exchange value. What sets bitcoin apart is its form. Not its nature.

There is not much difference in principle between private money (as it has existed often in the 19th century) and bitcoin. The issuers of the private money are the miner pools ; for the moment they stick to a pre-determined emission curve (the famous 21 million coins) - in principle they could change that any moment. And there is a public auditing system of their ledger. So the concept is quite well known ; the form is new.

Quote

Well, I must disagree with you here: velocity is precisely what is interesting about the last 20 years of monetary, banking, and economic policy and law. The establishment is moving more and more toward systems which CAN control velocity and DO. Read up on the cashless society. The current vast majority of financial transactions use electronic fund transfers which may be FROZEN at any point. People don't even realize how quickly all of their bank deposits could evaporate or move into an inaccessible state.

Well, that's a very radical way of "regulating velocity". You can hardly call that a monetary policy. It is an emergency (panic) decision to do so, to try to block a run-away condition. Things like what happened in Greece at a certain point, was just a measure to avoid Greek banks which were essentially bankrupt, to collapse, the time needed to bring the Greek government back to reason, or to have it decide to step out, so as not to have the whole of Europe pay for Greeks' jokes.

Quote

Any future "Electronic bank runs" will end in seconds rather than days.

In the modern fiat system, a bank run doesn't exist any more, because there's no fractional reserve banking any more. Banks are 1-1 covered in principle by non-monetary assets, which they can use to obtain as much central bank money as they want - the only thing is that it costs them interest, and hence they only keep a small reserve handy ; but normally banks can now obtain as much central bank money as their assets allow them. It is because, exactly, this was locked for the Greek banks, that they had to restrict money movements at a certain point. But a healthy bank cannot undergo a bank run any more in the modern system, because it is fully covered.

Quote

So of course it's possible to control velocity - that's precisely what the USA Fed (for example) has been tasked with (control of supply and velocity meets their inflation targets)! They influence velocity by setting interest rates and printing more free money for banks.

Yes, but they don't control velocity directly. By setting interest rates, they influence the desire to exchange non-monetary assets for new money, so essentially, indirectly the monetary mass, because they change the incentive for people to want to borrow (= exchanging non-monetary assets for freshly invented money) and of course, this also has an indirect effect on velocity.

Quote

Cryptos represent a new challenge to this regime. Velocity is really only bounded by network capacity, and it's not decreasing at all, in fact it's increasing. This is not any deflationary spiral.

In fact, it is difficult to talk about velocity for a speculative asset, because it doesn't buy goods and services, but it exchanges in and out with other monetary assets, so there is no "Q" that has any meaning. If I exchange 1 bitcoin once a day for fiat, and back to bitcoin, my contribution to Q is 2 x $1700, and my contribution to the number of coins exchanged is 2 (two trades). If I exchange this coin 100 times a day, my contribution to the number of coins (velocity) is 200, but my contribution to Q is also 200 x $1700. So this doesn't modify anything. Fisher's formula had as an idea that Q was some genuine "irreversible" acquisition of goods and services. It is still mathematically valid for exchanges, but as Q augments with V, it doesn't change anything.

The deflationary spiral resides rather in the fact that people hoard (even if they quickly trade in and out) coins for the rise of its value, and not because they use it as an intermediate between earning and spending value. In other words, the deflationary spiral is the monetary equivalent of the speculative bubble run-away but seen from the other side.

Bitcoin's price is not pushed upward by the demand for bitcoin to be used as a currency. It is mainly pushed by the desire to hold bitcoin when it rises, with the idea to make benefit over it, by "buying low and selling high". Not by earning for goods and services (say, "salary") and by spending it on goods and services (say, buying stuff). This happens, I don't deny this, but it is not the demand for salary that pushes the price of bitcoin. It is the hope for higher prices that makes one buy bitcoins, not the need to use it as a currency.
If there had been an upper cap on the value of a coin, then this speculative nature wouldn't be there, and bitcoin would *essentially* be used as a currency, because there's no hope for "rise". Yes, there is volatility, and normal speculation as a side effect, but it wouldn't make its market cap.